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By Jeffrey A. Tucker
If patents for inventions were part of the free market, to make and sustain them would not require legislation, constitutions, bureaucracies, filings, armies of attorneys, and years of litigation. They would exist in the same way regular property rights exist. From time immemorial, people have owned stuff. They’ve used stuff. They make deals and trade. No one is harmed.
But with patents, a government agency causes them to exist. Once the apparatus is in place, you hire an attorney. You hammer together just the right claim. If it looks vaguely unique—lawyers specialize in this—three years later, you get back a sheet of paper that guarantees you an exclusive right. This is not a right for you to make a thing. It is a right for you to exclude others from making that thing.
In other words, a patent is a license to coerce third parties who may or may not know anything about your supposed invention. It doesn’t matter if someone else invented your widget completely independently. You now own the government-granted right of monopoly privilege. Patents are no more or less than that.
The whole subject of “intellectual property” (IP), of which the patent is one type, confuses people who otherwise believe in property rights. IP is not a property right such as the one you own over your shoes or house or business. It is manufactured right, one invented by legislatures and bureaucracies to back some producers over other competitive producers.
Along with tariffs, patents were the earliest form of crony capitalism. And they have been dragging down the pace of economic innovation from the beginnings of the Industrial Revolution to the present, from the steam engine through the smart phone. They throw barriers in the way of the discovery component of the market process and entangle enterprise in a thicket of lawsuits.
In a free market, a commercially successful producer with a new and economically viable product can hope to experience a period of profitability just by being the first to market. It takes a while for others to observe the success, speculate on its continuation, roll out a new version, and get it to market. It is never enough to copy. You have to improve to beat the market leader. This is how the free market works. It is based on learning and competition, not monopoly.
Patents change everything. By granting a monopoly, the producer can prolong the period of profitability for longer than the free market would otherwise allow. The history of invention is filled with examples of individuals and firms who get the grant and then squander massive resources to hold on to it against the attempts of “pirates” to enter the market. Eli Whitney, the Wright Brothers, Alexander Graham Bell, and Steve Jobs are all examples. (As a side note, patents have seriously distorted our perceptions of the history of invention. We need a radical reconstruction of this history that does not rely on patent records.)
Patents don’t help the little guy. They help the big guy who is already successful beat back the competition. This is why writers in the classical liberal tradition have long pointed to patents as unjust, inefficient, and unnecessary interventions.
In 1851, The Economist stated why: “The granting [of] patents ‘inflames cupidity’, excites fraud, stimulates men to run after schemes that may enable them to levy a tax on the public, begets disputes and quarrels betwixt inventors, provokes endless lawsuits . . . The principle of the law from which such consequences flow cannot be just.”
Joining the opposition in the 20th century have been Fritz Machlup, Ludwig von Mises, Murray Rothbard, and F. A. Hayek. (Ayn Rand was an exception.) And all of this opposition came about before the huge expansion of the patent system today that applies to seeds, software, and even time travel.
Ninety-nine percent of the patents issued are never used. Most patents just sit there like time bombs to blow up other attempts to enter the market. They don’t inspire people to invent; they inspire people to use parasitic methods to stop others from inventing.
What a strange system of central planning it all is! You can’t have free enterprise when the government is slicing and dicing ideas and assigning monopolistic titles to them. The purpose of property and prices is to provide for the peaceful allocation of scarce resources. Ideas, once public, are no longer scarce.
As Thomas Jefferson said in a letter from 1813: “If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea . . . He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”
By Adam Mossoff
Factual inaccuracies and historical misconceptions abound in debates about patents. So let’s first clear the air. As a preliminary matter, it’s important to recognize that early American legislators, judges, and commentators invoked Lockean natural rights theory in recognizing that patents rightly secured the “fruits of labors” of inventors (see here and here). This isn’t surprising, as John Locke himself embraced inventions and writings as property rights. He endorsed copyright as property in 1695 and he approved of “invention and arts” in his chapter on property in the Second Treatise (see here).
Some libertarians also assert that historically patents were statutory (monopoly) grants that were distinguished from “common law” court decisions that secured property rights in land, but this is myth masquerading as history (see here and here). We should reject it for the same reason we reject historical myths like the “robber barons,” because each uses a false account to bootstrap a normative argument. In fact, in the early American republic, courts secured patents as fundamental property rights: Judges created and applied to patents the same legal doctrines used to secure real estate, expansively protected patents, and provided constitutional protections to patents (see here, here and here).
In a short essay, of course, I cannot fully justify patents as property rights, but I can briefly summarize the case. At root, the justification for property rights is a justification for all types of property rights, such as farms, buildings, factories, oil and gas, radio spectrum, corporations, and inventions, among others. All “property” arises from the fact that one must produce the values required for a flourishing human life. (Here, “value” is not an economic concept, it is a moral concept, referring to those things a person produces to live a flourishing life.) Thus, the “right to property” defines the sphere of freedom necessary to create, use, and dispose of these values.
All production, whether of factories, cars, computers, or new biotech drugs, necessarily starts with a process of conceptually identifying both the values one seeks to create and the means to create them. This was Locke’s genius, as he was the first to recognize, albeit imperfectly, that property arises from the moral act of productive labor (see here and here). Ayn Rand’s genius was to recognize that man’s mind is his basic means of survival, that production is the application of reason to the problem of survival, and thus that all property is logically intellectual property at root.
Rand’s ethical theory makes explicit why property rights have never been limited to just physical objects: the genius and success of Anglo-American property law is that it recognized that property rights secure values, not physical objects. American courts have long recognized that “property ... may be violated without the physical taking of property” given any act that “destroys it or its value.” (In re Jacobs, 98 N.Y. 98, 105 .) This is the meaning of the natural rights metaphor that property rights secure the fruits—i.e., the use and profits—of one’s labors. As another court explained, “A man may be deprived of his property … without its being seized or physically destroyed, or taken from his possession.” (Wynehamer v. People, 13 N.Y. 378, 433 .)
For this reason, American law justly secures property rights in novel and useful inventions—securing the right to make, use, and profit from the value created by an inventor’s productive labors. Patent law thus secures the same rights in inventions as it does in securing all values created by all types of productive labors. As an American court recognized in 1845: “we protect intellectual property, the labors of the mind, productions and interests as much a man’s own, and as much the fruit of his honest industry, as the wheat he cultivates, or the flocks he rears.” (Davoll v. Brown, 7 F. Cas. 197, 199 [C.C.D. Mass. 1845].)
All property is fundamentally intellectual property, because the human mind is the ultimate root of the values we produce to live flourishing lives—and all of these values are justly secured as property rights to their creators.
What to make of this normative insight?
First, it means that property rights are not fundamentally justified as a solution to disputes over “scarce” goods. To begin the moral justification for property rights from the economic concept of scarcity leaves unanswered the questions, “Why is producing values morally justified” and “Whence do values come?” Of course, property is a moral standard for resolving disputes, but this is only a logical corollary of the moral justification of property rights: The fruits of productive labor should be secured to their creators.
Second, property rights are objectively defined by the nature of the value secured to its owner. Thus, different types of property are secured differently under the law. Term limits and other unique legal protections or limits for patents are of no more fundamental import than other doctrinal differences in how the law secures property rights in water, chattels, land, spectrum, corporations, credit, etc. In short, neither scarcity nor term limits refute the fundamental, moral reason why patents are property rights. All property rights secure, in the words of Rand, “a man’s right to the product of his mind.”
Adam Mossoff is Professor of Law and Co-Director of Academic Programs at the Center for the Protection of Intellectual Property at George Mason University School of Law. His academic articles can be downloaded at http://papers.ssrn.com/author=345663.